Chapter 2Key Issues
2.1The majority of submitters and witnesses supported the Copyright Legislation Amendment Fair Pay for Radio Play Bill 2023 (the Bill) in principle and agreed that copyright holders for sound recordings should be remunerated at a rate fairly determined by the Tribunal.
2.2However, some stakeholders opposed the Bill due to the possibility that it would impose additional financial costs for broadcasters that use sound recordings and therefore have a negative impact on both commercial radio broadcasters and the Australian Broadcasting Corporation (ABC). These stakeholders suggested other ways copyright holders and Australian artists might be better remunerated for the broadcast of sound recordings without imposing additional costs on radio.
2.3This chapter discusses:
the market negotiation of licencing fees for the broadcast of sound recordings;
remuneration for Australian copyright owners and artists;
the impact of increased licence fees on radio broadcasters; and
obligations under international law.
Market negotiation of licencing fees for the broadcast of sound recordings
2.4Some submitters supported the Bill because it would allow copyright holders to negotiate a market rate for the broadcast of published sound recordings.
2.5The Law Council of Australia (the Law Council) noted in its submission that the ‘broadcasting of recorded music by the broadcasters plainly has value to the broadcasters otherwise they would not broadcast the material’. It explained:
In some cases, such as a radio station whose repertoire is essentially playing Top 40 hits or ‘golden oldies’, the recorded music is central to the existence and purpose of the station.In other cases, the playing of recorded music provides light relief or ambience to the programming.
2.6The Phonographic Performance Company of Australia (PPCA) shared the Law Council’s assessment of the value of sound recordings to radio broadcasters, stating that ‘[m]usic is, and continues to be, an integral part of the radio experience’:
Research by [the International Federal of the Phonographic Industry] shows that 73% of consumers listen to the radio mainly for the music and 63% of consumers report that, without music, they wouldn’t listen to the radio. [Commercial Radio and Audio’s] recent Connecting Communities: The economic and social contribution of commercial radio and audio in Australia report acknowledged that 85% of listeners identified music as one of the main content types they consume. The use of sound recordings is therefore pivotal to the radio business model.
2.7Given the value of sound recordings to radio’s business model, the Law Council argued that broadcasters ought to pay copyright holders an amount that reflect the value to the business:
In principle, the broadcaster should pay the copyright owner the value of the copyright as an input, just as the broadcaster must pay the supplier of electricity the market rate for the electricity it uses and so on.
2.8The Attorney-General’s Department (AGD) explained that broadcasters and copyright holders currently negotiate licence fees for the use of sound recordings. However, AGD further explained that under the Act, there are restrictions on the amount the Copyright Tribunal (Tribunal) can order payable should parties be unable to reach an agreement:
The rates of licence fees for the broadcasting of sound recordings can be negotiated between broadcasters and the owners of copyright in sound recordings. However, where the parties cannot agree, section 152 of the Copyright Act provides for the Copyright Tribunal to determine the amount, subject to the caps in subsections 152(8) and 152(11)[.]
2.9AGD noted that for commercial broadcasters, the Act restricts the amount to one percent of revenue:
Subsection 152(8) limits the amount that the Tribunal can require a broadcaster which holds a licence under the [Broadcasting Services Act 1992 (Cth)] or a person authorised by an Australian Communications and Media Authority class licence to pay in respect of the broadcasting of published sound recordings. The cap on the amount that can be ordered by the Tribunal in this instance is one percent (1%) of the gross earnings of the broadcaster (the 1% cap).
2.10For the ABC, the amount is restricted to 0.5 cents per head of the Australian population:
Subsection 152(11) limits the amount that the Tribunal can order the Australian Broadcasting Corporation (the ABC) to pay in respect of the broadcasting of published sound recordings. The cap on the amount that can be ordered by the Tribunal in this instance is 0.5 cents per head of the Australian population (the ABC cap).
2.11Media Arts Lawyers supported the Bill’s repeal of these caps. It argued that the repeal would ‘open the door to a re-negotiation between PPCA and Radio for fair market rates to be paid to appropriately reflect the value of the copyrights being licenced’. While the cap for commercial broadcasters is one per cent of the broadcaster’s revenue, Media Arts Lawyers explained that the cap on the Tribunal is treated as a starting point in negotiations and that in practice the actual rate paid is lower:
We note that currently, PPCA receives just [0.4%] of gross annual revenue in licence fees under its agreement with Radio because the 1% Cap was deemed as a starting point by the Copyright Tribunal in negotiations that proceeded downwards.
2.12Media Arts Lawyers further explained that this rate has been determined by a Tribunal decision in which radio was able to negotiate a rate at 0.4 per cent:
…when this rate was settled, the approach was to use the one per cent as a ceiling and work down from there. There were points negotiated, one of which was, 'There's an element of promotional value, so we're going to deduct a portion from the one per cent towards the promotional value that radio gives performing artists'. On top of that, there was, 'We play a lot of US content on Australian radio, so let's deduct a bit more for that'. I'm not sure of the exact percentages or how these figures came about, but it's certainly my understanding from the Copyright Tribunal's proceedings that what eventually got settled on was this 0.4 per cent downwards from the cap…The only thing in the act is the one per cent. So, if you say, 'Why haven't the parties revisited and tried to push it up?' I think the arguments were as strong as they are now because radio, basically, is very good at applying a lot of pressure.
2.13Media Arts Lawyers explained the reasoning behind this Tribunal decision in its answers to questions on notice. According to Media Arts Lawyers, the one percent cap under the Act ‘was deemed the ‘full’ or ‘highest’ rate that could be determined’ by the Tribunal and ‘other factors or ‘relevant matters’ put forward by the parties for the Tribunal’s consideration in determining the rate, were naturally going to be deemed as grounds for a corresponding reduction to the statutory ceiling’. In considering these other factors, the Tribunal established:
…that the total time allocated by broadcasters for playing sound recordings as compared to the radio stations total on-air time was 49%. The Tribunal balanced this time against the percentage of protected sound recordings receiving airplay and factored in the promotional benefit of airplay that resulted in record sales to determine the rate.
It is worth noting that while the Tribunal factored the promotional value of airplay into its calculations, the Tribunal found it was ‘impossible to quantify the extent’ by which the Tribunal should reduce the royalty by ‘with any precision’. Ultimately, the Tribunal set a rate of approximately 0.4%, and that rate remains in place today under the current PPCA-CRA Broadcast Agreement.
2.14According to PPCA, negotiations between PPCA and the Federation of Australian Broadcasters, Commercial Radio and Audio’s predecessor, established an agreement to pay 0.4% ‘in the shadow of the 1983 “MMM” Copyright Tribunal case’. That case ‘considered an appropriate rate for a single station operating at that time’.
2.15In PPCA’s view ‘it would be foolish to assume that a rate set in relation to one station broadcasting in 1983 would continue to be relevant in 2024’. Accordingly, PPCA added that it ‘has referred a scheme to the Copyright tribunal to address the gap between the current average rate of [0].4% for Commercial Radio and Audio association members and the maximum capped amount’ of one percent. That scheme ‘was referred to in May 2023’ and ‘the hearing is currently scheduled to take place in May 2025’.
2.16Media Arts Lawyers argued a rate of 0.4% is insufficient. For instance, it noted the difference between fees which broadcasters pay to copyright holders for sound recordings and for musical compositions, which are not subject to a licence fee cap under the Act:
Comparatively, there is no such statutory pricing cap mandated for the broadcast licence fees paid by Radio to [Australasian Performing Right Association (APRA)] for the use of musical compositions. We note that APRA currently receives broadcast licence fees at the rate of up to 3.76% of gross annual revenue under its agreement with Radio.
2.17Media Arts Lawyers also drew international comparisons to support its argument, noting evidence that ‘overseas collection societies received between 1.5% and 5% of annual gross revenue in license fees from radio for the broadcast of sound recordings’.
2.18The Australian Copyright Council (ACC) explained that the ‘Tribunal may make an order, confirming, varying or substituting’ a ‘proposed or existing licencing scheme’ between a broadcaster and a copyright owner ‘for another scheme proposed by one of the parties to the Tribunal proceedings’.
2.19The ACC further explained that the Tribunal may make an order ‘after considering what is reasonable in the circumstances’. Although ‘[t]here has not been any ‘authoritative exposition of the meaning of ‘reasonable in the circumstances’’, the ACC also noted:
…decisions of the Copyright Tribunal regarding disputes referred to it under section 154 provide guidance as to how the Tribunal approaches its task of assessing a proposed licensing scheme and determining what it ‘considers reasonable in the circumstances’.
2.20Accordingly, the ACC summarised the approaches used by the Tribunal ‘to determine whether a licensing scheme (and fees payable under it) are reasonable’ based on the decision of the Tribunal in the Phonographic Performance Company of Australia Limited (ACN 000 680 704) under section 154(1) of the Copyright Act 1968 (Cth) [2007] (Nightclubs case):
(i) Market rate: ‘the rate actually being charged for the same licence in the same market in similar circumstances’.
(ii) Notional bargain rate: ‘the rate on which the Tribunal considers the parties would agree in a hypothetical negotiation, between a willing but not anxious licensor and a willing but not anxious licensee’.
(iii) Comparable bargains: ‘bargains not in the same market but sufficiently similar to such a notional bargain as to provide guidance to the tribunal’.
(iv) Judicial estimation: a rate determined by the Tribunal taking account of a range of matters such as ‘previous agreements or negotiations between the parties; comparison with other jurisdictions; comparison with rates set by other licensors, capacity to pay, value of the copyright material, the general public interest and the interests of consumers; and administrative costs of a licensing body’.
2.21The ACC argued that ‘caps on licensing fees for the broadcast of sound recordings … are anomalous and inconsistent with the notion of fair or equitable remuneration’. In support of that view, the ACC referred to another Tribunal decision, Phonographic Performance Co of Australia Ltd (under s 154 of the Copyright Act 1968 (Cth) [2007] ACopyT 1 (Simulcast case) in which the Tribunal remarked that the 0.4% was not reflective of a market rate in relation to the simulcast of sound recordings:
PPCA would be in a strong position to maintain that the 0.4% from the PPCA-CRA Broadcast Agreement is an inappropriate starting point because it does not reflect a market rate for that right and, accordingly, cannot be a proper basis for a market rate for the simulcast right.
2.22The ACC therefore recommended that caps ‘should be repealed in line with the proposed amendments of the Bill’.
2.23The Law Council described the Tribunal as ‘an independent, expert and specialist arbiter established under the Act’ that can ‘fix the amount payable by the broadcaster to the copyright owner’. The Law Council referred to recommendations from the Australian Competition and Consumer Commission that ‘ideal equitable remuneration’ for the use of copyright material should be ‘determined using a combination of “benchmarking” and “construction”’. The Law Council submission summarised both approaches:
“Benchmarking” involves using appropriate rates grounded as far as possible in competitive market rates. “Construction” involves constructing a hypothetical bargain between a willing, but not anxious, licensor and a willing, but not anxious, licensee by applying an economic model to construct an appropriate licence fee. Preferably, both methods should be used as a cross-check.
2.24The Law Council stated that both approaches ‘aim to ensure that the copyright owner receives fair value for the use of their copyright material while at the same time protecting the user from unfair exploitation’. It argued that the current caps under the Act prevent the Tribunal from applying these approaches and therefore from achieving that aim:
The ceiling on the rates that is fixed by sections 158(8) to 158(11) violates this objective by imposing an artificial constraint on the rates that can be fixed.The Copyright Tribunal should not be artificially constrained from determining what the true value of the use of the recorded music is to the broadcaster, and a fair apportionment of that value between the copyright owner and the broadcaster.
2.25For that reason, the Law Council agreed with the ACC and supported ‘the repeal of sections 152(8) to 152(11) proposed in the Bill’.
2.26However, several stakeholders disagreed that removing the caps would allow for fair negations between copyright owners and broadcasters.
2.27For instance, the ABC argued that negotiations between a broadcaster and a copyright holder would not be a true free market negotiation due to the role of collecting societies:
Negotiating with a collecting society is collective bargaining. It is impossible for the ABC to negotiate a licence with each of the copyright owners for every sound recording it wishes to use on the ABC every day to achieve its broad remit; one of the reasons a public digital media organisation like the ABC is granted a statutory radio cap and other statutory licences is to obtain administrative efficiency. Where the ABC does not have a statutory right, for practical reasons and to reduce administrative costs, the ABC is effectively required to go down the path of licensing that copyright with a collecting society. However, in that respect it cannot be truly said that there is competition in the marketplace to ensure a "free market" price is achieved.
2.28The ABC raised further concerns that ‘[i]f the radio cap is lifted, there is also the potential for Copyright Tribunal proceedings to divert further resources and money of the ABC away from its functions should the parties be unable to reach agreement’. The ABC described those Tribunal proceedings as ‘costly and inefficient’.
2.29Commercial Radio and Audio (CRA) shared the ABC’s concerns regarding Tribunal proceedings:
It is open to parties to make a referral to the Copyright Tribunal to set the licence fee. However, the costs of doing this are prohibitive (typically multi-millions of dollars) and the process takes several years. Even if the process were to be streamlined, it is not good policy to have a regulatory framework that is so unbalanced that it relies on expensive and time-consuming intervention by a judicial body.
Australian content obligations for broadcasters
2.30Some stakeholders argued that Australian content obligations for broadcasters would prevent fair negotiations from taking place even if the caps on the Tribunal were removed. These stakeholders contended that the current caps should remain because they serve as a fair counterbalance to legislative requirements for radio broadcasters to play Australian music.
2.31For instance, Southern Cross Austereo noted that under the ‘Commercial Radio Code of Practice (Code of Practice), registered by the Australian Communications and Media Authority under the Broadcasting Services Act 1992 (Cth), a radio station can be obliged to play up to 25% Australian music between 6:00am and midnight depending on the radio station’s format.’
2.32CRA argued that the ‘1% Cap was introduced to balance the legislative obligation on radio stations to play Australian music’. It submitted:
‘[F]ree market negotiations’ can only take place if the Australian music quotas are also removed along with the 1% Cap. Without the Cap, the market power of the three multinational recording labels, combined with the obligatory music quotas on radio broadcasters, would destroy any market equilibrium. To remove the 1% Cap and not the Australian music quotas would create an unbalanced regulatory framework and unfair negotiating position.
2.33Capital Radio Network also did not support the Bill due to Australian content obligations:
The removal of the 1% Cap by way of the Amending Bill, provides an open-door policy on record labels to charge increased fees for Australian content that radio has no choice but to play. Without the 1% Cap, broadcasters across Australia would still be forced to ensure that their song lists comprised at least 25% Australian music, without regulation on the price.
2.34Ms Annabelle Herd, Chief Executive Officer of the PPCA, disagreed that the one percent cap should remain in effect to balance requirement to play Australian music. Ms Herd suggested that this was not the policy intent of Australian content obligations:
…It is simply not true that the cap was related to the introduction of content quotas. The quotas were introduced originally in 1942. They were updated to the current system when the Broadcasting Services Act was introduced in 1992. They've never been linked to this cap. Quotas are about getting Australian stories to Australian audiences. They are a cultural policy tool to benefit Australian audiences. They're not there to benefit the music industry and they're not there to benefit radio; they are there to benefit the public, to hear Australian voices and Australian stories on our airwaves.
2.35APRA AMCOS recommended that ‘the playing of Australian music on radio must be preserved and supported alongside the removal of any unnecessary legislative caps on royalties payable for playing Australian music’. It cautioned against the removal of content obligations:
[D]ue to the obligations of the 2004 Australia-United States Free Trade Agreement (AUSFTA) the 25% cap on music quotas faces a ratchet mechanism should it ever be lowered. If the Australian local music quota measure were to be liberalised (that is, lowered) by the government, it cannot then be raised at a later date – the liberalised measure becomes bound as part of the AUSFTA commitments.
Remuneration for copyright holders and Australian artists
2.36Many stakeholders supported the Bill because it would allow copyright owners and particularly Australian artists to be fairly remunerated for the use of sound recordings by negotiating a market rate for the broadcast of sound recordings.
2.37PPCA summarised its view that artists are entitled to receive fair remuneration for the use of published sound recordings:
Artists expect to receive fair remuneration for the use of their sound recordings, and the industry is looking to see music fairly valued by those who sell and consume it. At a time when the market is still facing disruption from the pandemic and cost of living crisis, a true market value for the use of music has never been more important.
2.38Support Act Limited explained the benefits of fair remuneration by referring to the results of a wellbeing survey of Australian artists:
Our 2022 survey titled “Mental Health and wellbeing in Music and Live Performance Arts” found that 66% of respondents had high/very high level of psychological distress (4x higher than the general population) and over one third reported income from their work in music as less than $30,000 p.a., which is below the poverty line.
Financial insecurity is one of the major triggers of mental ill health, and in extreme circumstances can lead to suicide, or suicide ideation. (59% of respondents to our survey had experienced suicidal thoughts, of which 20% had planned to take their own life and 13% had attempted to).
2.39In Support Act’s view, these survey results highlighted the importance of allowing copyright holders to negotiate a fair market rate for the broadcast of sound recordings:
It is therefore critical that artists and the record labels who support them are remunerated fairly for the use of their sound recordings on radio. In our view the current caps discriminate against recording artists and those who invest in them and should be removed, allowing the copyright holders to negotiate a fair market rate.
2.40Warner Music Australia agreed that it ‘is important that artists and record labels receive fair remuneration for their work’ and suggested that this was currently being prevented by the restrictions on broadcast licence fees in the Act. In its view, the ‘caps in the Copyright Act have resulted in lost income for many artists over five decades’.
2.41According to the International Federation of the Phonographic Industry (IFPI), the current caps under the Act have meant that Australian artists are remunerated for sound recordings at a rate lower than that for artists in comparable jurisdictions:
Due to the caps, the income that Australian rights owners receive for the broadcasting of sound recordings is many times lower than what record companies and artists receive in similar economies, i.e., around a sixth of what they receive in the UK or Canada, and one tenth of what they receive in Norway or Denmark.
2.42The AGD explained that artists are remunerated for the use of sound recordings through statutory broadcast licence fees collected by the PPCA on behalf the copyright owners, which are typically record labels:
Licensing organisations operate to administer licences on behalf of copyright owners in these different works. The Phonographic Performance Company of Australia (PPCA) administers licences for the rights in sound recordings, which are usually held by record labels.
2.43The ABC noted that, given the copyright for a recording is typically held by a record label, artists are usually remunerated based on a contract with the relevant label:
In a typical recording deal, copyright in a sound recording is usually owned by a record label, rather than the recording artist. In these deals, the income artist receives is usually governed by the terms of their contract rather than copyright.
2.44Some stakeholders raised concerns that any increase in broadcast licence fees would not result in increased remuneration for artists. For instance,CRA contended that if the Bill allowed the PPCA to collect a higher licence fee, this increased revenue would be absorbed by the record labels rather than be passed on to artists:
…the record labels pocket almost all of the PPCA fees, passing just ~10% to artists, and nothing to session musicians who are the backbone of the industry. Australian artists have little bargaining power against the record labels to improve their share of PPCA payments.
2.45However, Mr Bill Cullen, artist manager, argued that the PPCA distributes directly to artists in addition to the record label:
There is a misconception that any increased revenue will be only to the benefit of the major record companies. This is not true. 50% of payments made for Australian music go directly to Australian artists, and any artists that own their own copyrights (eg Paul Kelly), receive the labels’ share as well.
2.46Mr John Watson, representing the Association of Artist Managers, explained that the 50 percent distributions from the PPCA to artists are a standard requirement across the industry:
…That's a requirement. So PPCA gets a dollar for a Cold Chisel master recording. They pay 50 per cent to Cold Chisel's record company and 50 per cent to the members of Cold Chisel who performed on that recording. It is then split by the band. What happens on the record company side is dependent upon the artist's contractual relationship … For Australian artists, 50 per cent is always paid to the performers on that record and split between them. The other 50 per cent goes to the label involved.
2.47Mr Watson further explained that the PPCA distributions to a record label may also benefit artists directly in instances where an artist is the owner of a record label:
…when we speak about labels making money, many of them are independent labels, many of them are Australian-owned labels, and increasingly many artists have their own record labels. When we say 'half goes to artists and half goes to labels', it's worth always remembering that sometimes the half that goes to labels is also going to the artist or going to an independent company. It's important to remember that.
2.48Furthermore, the PPCA itself explained that the income received by a record label is invested back into the industry. The PPCA argued that this investment benefits Australian artists:
In a record label business model, labels enter agreements with artists, providing upfront financial support and payments for their projects as well as overseeing the entire process of production, promotion, and distribution of their music. Record labels are the music ecosystem’s single-largest investors in music, in both human and financial resources with 29.7% of global revenues invested back into marketing and A&R annually.
2.49Universal Music agreed that one of the functions of a record label is to ‘invest significantly in the development of Australian artists and the Australian music community’.
2.50Similarly, Sony Music explained that as a record label it:
… invests heavily in identifying and developing Australian musical talent and producing, marketing and promoting their recorded music… Sony Music’s annual investment in signing Australia[n] recording artists and funding the making of their recordings, and the marketing and promotion of those recordings, typically exceeds A$5.0 million.
2.51Sony Music supported the removal of the current caps. It contended that they ‘reduce revenue for copyright owners and Australian recording artists’, which in turn results in the ‘creation of less Australian recordings’. It added that ‘the caps potentially decrease quality in music because of the artificial limitation of returns to artists and producers of sound recordings’.
2.52The Media, Entertainment and Arts Alliance (MEAA) and Genuine Article expressed reservations about the relationship between record companies and the PPCA, which administers licencing fees for sound recordings on behalf of the copyright owners:
The Australian distributor of revenue from radio licences (Phonographic Performance Company of Australia) has three shareholders who are also the three largest multi-national record companies operating in this territory – Sony Music, Universal Music, and Warner Music. There is a perceived (some might say ‘obvious’) conflict of interest that needs to be interrogated to determine how the current system remunerates musicians and exactly where the licence fees go.
2.53CRA shared this concern regarding a possible conflict of interest between record companies and the PPCA. It suggested that the PPCA:
…change its corporate structure to a company limited by guarantee, to avoid the conflicts that arise from the fact that its shareholders are record companies, not Australian musicians.
2.54However, the PPCA responded to the suggestion that it is subject to a conflict of interest, stating it does ‘not believe the inference of conflict of interest is valid’. The PPCA noted that it is ‘subject to significantly more external independent review than CRA or its members’. For instance, the PPCA explained it is ‘subject to the Code of Conduct for Copyright Collecting Societies’ for which PPCA is reviewed for compliance ‘every three years’ by ‘the Triennial Code Reviewer’. Additionally, the PPCA was reviewed in relation to that code by ‘the Department of Communications and the Arts Bureau of Communications and Arts Research’ in 2019, which ‘found that there was a strong record of compliance with the Code’.
Payments to Australian artists by the PPCA
2.55Some stakeholders who opposed the Bill argued that a better way to increase the remuneration that Australian artists receive from the broadcast of sound recordings would be to reform the distribution practices of the PPCA.
2.56For example, CRA contended that the PPCA’s distribution scheme is ‘fundamentally flawed’. It referred to evidence that the PPCA’s ‘cost to income ratio was 16.1%’ in 2021/2022 and that reform in relation to reducing these administrative expenses ‘has substantial potential to improve the amounts payable to Australian artists’.
2.57In CRA’s view, the PPCA could increase remuneration for Australian artists either by increasing its distribution to artists or by reducing its administrative fees. CRA argues that if the ‘PPCA increases its current distribution to artists by 10 percentage points…this would generate $4.7 million in additional payments for artists’. CRA added:
Similarly, a reduction of PPCA’s administration fees from the current 16 percentage points to a more reasonable 5 percentage points will generate an additional $5.2 million for artists at no cost to any industry (assuming that the entire saving is directly distributed to artists).
2.58According to ARN Media, changes to the distribution policies of the PPCA would allow Australian artists to receive greater income from sound recordings without placing increased costs on radio:
…if total royalties increased from say $4m to $12m, then of that $8m increase, only around $800k would find its way to the musicians, while radio has an additional $8m in costs. In other words, the $8m could cause risk of financial unviability and loss of regional stations, risk of less forums for Australian music to be discovered, while putting $7.2m in the hands of multinational record labels and only $800k in the hands of artists.
2.59ARN Media concluded that ‘[i]mproving the distribution of PPCA fees would represent an easier, fairer and faster solution for artists than removing the legislated cap.
2.60The PPCA disagreed with the suggestion that its distribution policies required reform:
Because PPCA is a not-for-profit organisation all surpluses (after deducting administrative expenses) are distributed to our Licensors and Registered Artists. In FY 22/23 the distributable surplus is $48.69m. PPCA’s expense to revenue ratio is currently around 15%, meaning 85 cents in every dollar is returned to the recording industry. This ratio is in line with similar collecting societies around the world and has been as low as 13.83% in recent years pre covid (covid had a major impact on PPCA earnings as many licensees were closed for a period or heavily financially impacted).
2.61According to the PPCA, allowing copyright holders to negotiate higher licence fees would result in greater distributions to both artists and record companies:
Securing a fair market rate for radio broadcast licences will further improve that ratio, driving more money back to artists and labels, as there are no additional administrative fees involved in distributing any increased radio revenues.
Impact on commercial radio broadcasters
2.62CRA noted the value of commercial radio broadcasters to the economy, listeners, and local communities:
The Australian commercial radio industry is a vital part of Australian culture. It informs, entertains and gives local communities a voice, especially in regional and remote areas. It contributed $1 billion to the GDP in 2022. It supports 6,600 fulltime equivalent jobs, and 38% of jobs in the industry are located in regional areas. Commercial radio is a vital, accessible and trusted source of news, particularly during emergencies and natural disasters. Commercial radio is a critical tool for communication when politicians need to speak to their constituents. It is in the public interest that Australia has a sustainable commercial radio industry.
2.63CRA did not support the Bill as it would allow copyright holders to negotiate an increase in licence fees:
Commercial radio already pays around $40 million in music copyright fees. This equates to approximately 5% of industry revenue (and represents a much greater portion of industry profit). Any increase beyond this already substantial level inevitably threatens the sustainability of sections of the commercial radio industry.
2.64In CRA’s view, the ‘1% Cap has never been needed more than now, as radio faces challenges from all fronts’. It noted several challenges including that ‘radio advertising revenue is trending downwards and is currently 16% below 2019 figures’ as ‘advertisers have increasingly shifted their focus and budgets towards online advertising’ due to ‘the rise of digital platforms and streaming services’.
2.65ARN Media Limited suggested that the Bill would result in broadcasters paying a higher rate for licence fees to the PPCA:
The PPCA has made it clear that it wants the existing 1% cap in the Act removed so it can renegotiate a rate many multiples higher, with PPCA Chief Executive Annabelle Herd suggesting it should be “somewhere between 2.5% and 5%”.
2.66The Special Broadcasting Service (SBS) contended that the ‘removal of the cap’ and ‘unrestricted Tribunal discretion’ could ‘result in an overall increase in the amount of royalties paid’. It added that although ‘the Copyright Tribunal is not bound in relation to the amount it can determine SBS pays’, as it is not a commercial broadcaster, it too would expect to pay more in licence fees should the Bill be passed:
It is foreseeable that this may in turn put upward pressure on the rates able to be negotiated by SBS. This is because the Copyright Tribunal may examine comparable transactions to see if they can throw any light on price as part of its process in setting a licence fee.
2.67According to ARN Media Limited, station closures for commercial broadcasters would be one possible outcome of allowing copyright holders to negotiate increased licence fees:
ARN believes any meaningful increase in fees – let alone at the scale demanded by the record labels – would have a corresponding impact all commercial radio operators and, for some, could lead to station closures, particularly in regional areas.
2.68Southern Cross Austereo agreed that an increase in licence fees would have significant consequences for radio:
At that level, the total royalties and fees paid by commercial broadcasters to APR AMCOS and PPCA would total up to 9% of gross industry revenue. This would be unprecedented globally and would cause significant financial challenges for even the most financially robust entity. As the fee is determined on revenue – not profit – it does not consider the profitability of broadcasters or individual stations, which can vary materially from year to year.
2.69According to Capital Radio Network, the impact of higher licencing fees brought by the Bill would:
…send our operational capacity backward in forcing higher fees to be paid in light of legislative requirements to maintain certain levels of content. Our stations will be faced with a decision to comply with legislated content requirements and in doing so compromise profitability in order to pay for them, at the cost of staffing levels and operational security and longevity.
2.70ACE Radio Network noted that if it were to start paying more in licence fees, it ‘would have to review its operating costs in line with the new fees’. It indicated that ‘such a review could lead to redundancies of broadcasters talent’.
2.71Southern Cross Austereo stated that as a commercial radio broadcaster it ‘considers the cost of music’ in its ‘programming decisions’. It explained that broadcasters consider the ‘savings from the reduction in the volume of music that would otherwise be played’ when ‘assessing the business for commissioning or acquiring non-music programming’.
2.72ACE Radio Network agreed in its submission:
If the 1% Protective Cap was increased, the ACE Radio Network would have to look at increasing talk-based programming on air to limit our production costs. This would be to the detriment of both the Australian music industry and Australian listeners, as it would restricts the formats that Australian radio can afford to broadcast.
2.73According to ARN Media, because the Bill would ‘weaken the financial health of the commercial radio industry’ it would also ‘undermine its considerable value to the Australian music’. For instance, broadcasters ‘changing formats to reduce costs’ in response to the Bill would ‘reduce the royalties and exposure for Australian musicians’.
2.74ARN Media further noted evidence in favour of the value of commercial radio that it suggested the Bill could weaken, including evidence that radio reaches ‘95% of the Australian population every week’ and that:
Radio stations make a concerted effort to contribute to Australian artists, directly through royalty payments and indirectly by supporting new and established artists by playing their music, promoting gigs and upcoming tours and interviewing them on air.
2.75APRA AMCOS disagreed with the concern amongst broadcasters that the Bill would necessarily result in an increase in licencing fees for sound recordings:
APRA AMCOS emphasises to the Inquiry that an unfettered Tribunal would not necessarily determine a rate higher than the Commercial Radio Cap and the ABC Cap – it might in fact determine a rate that is below the cap at one point in time and in excess of the cap at another. This would simply be a reasonable and judicious exercise of its jurisdiction without the unnecessary restraint of a statutory cap on a specific use of sound recordings.
2.76Mr Lauri Rechardt, Chief Legal Officer representing IFPI, explained that Italy had removed similar caps on licence fees. He noted evidence that the removal of caps in that jurisdiction did not impact on the ability of radio broadcasters to remain profitable and did not result in a decrease in the amount of music played:
….On an average the rates increased significantly in percentage terms but, as far as we can see, even those negotiated rates had no impact on the ability of radio to operate profitably. Also, importantly, there was no impact on the amount of music used by the radios. That's important because obviously Italian radios can, if you will, adjust their payments based on how much they use music. The less you use music, the less you pay; the more you use music, you pay the full rate.
2.77The PPCA also clarified the suggestion that the rate should be increased to between 2.5% and 5% of broadcaster revenue. It stated that ‘it is very difficult to say with any certainty what a rate should be’ given the current absence of ‘open commercial negotiation’ between copyright owners and broadcasters that would otherwise ‘inform the settling of an agreed market rate’. Further, it indicated that unrestricted negotiations would not necessarily result in a standard rate across all broadcasters:
…in fact, there may be multiple rates applicable to the circumstances of a subgroup of broadcasters (e.g. talk stations, or truly independent regional broadcasters).
2.78For instance, and as explained by the ACC, the Tribunal could determine different rates for regional and metropolitan based broadcasters:
The broad discretion for the Copyright Tribunal to consider (under a section 154 referral) what is ‘reasonable in the circumstances’ can potentially encompass different rates for regional broadcasters and metropolitan based broadcasters.
Impact of the Bill on regional commercial broadcasters
2.79Some broadcasters raised concerns that the impact of higher licence fees would be greatest in regional communities that depend on commercial radio for local news content and emergency broadcasts.
2.80CRA noted the community value of commercial radio broadcasters in regional areas:
All regional radio stations have a legislated obligation to play 3 hours of daily hyper-local content, which is local to the licence area. This content must be broadcast at peak listening times (5am to 8pm). No other platform offers such a range of live, local and Australian voices within such a diverse range of communities.
2.81In CRA’s view, allowing copyright holders to negotiate higher licencing fees would have the possible effect of undermining the contribution of regional broadcasters to local communities:
If copyright fees…are increased, the vital contribution offered by commercial radio stations to local communities will be eroded, and, if stations become unsustainable, may be removed entirely.
2.82Capital Radio Network agreed, opposing the Bill because ‘higher, uncapped fees’ paid for sound recordings would ‘inhibit [its] ability to function, hire staff, and operate as a business within regional communities’. In particular, it noted the role of regional radio broadcasters during times of emergency:
…CRN stations broadcast emergency fire warnings every 15 minutes during catastrophic fire conditions. They also regularly broadcast road closures and conditions during winter months due to heavy snowfalls. The Amending Bill could prevent our ability to maintain key services such as this.
2.83ACE Radio Network referred to emergency broadcast coverage by Gippsland’s Gold and TR FM stations during fires and flooding in October and November 2023 as an example of the importance of regional broadcasters to regional communities:
…in the early hours of Sunday the 1st of October, the communities of Erica, Rawson and Walhalla were put on alert for a fire that began sometime before 5 am that morning. Quickly escalating from Watch and Act through to Emergency Warnings for evacuation, Gippsland's Gold and TR FM were on air broadcasting important messages for those communities and interviewing incident controllers on air to provide as much information as possible.
2.84ACE Radio Network explained that ‘Gippsland’s Gold and TR FM produced well over 80 hours of live emergency broadcasting in one week’ during that period.
2.85According to ACE Radio Network, the ‘proposed change to the 1% Protective Cap will have a fiscal impact’ on commercial radio and would ‘require restructuring’. In ACE Radio Network’s view, such restructuring would have negative effects in regional areas as it ‘could lead to local job losses along with a reduction in local information, news, and emergency broadcasting’.
2.86According to the PPCA, however, ‘arguments that removing the caps will severely damage and disproportionately impact regional radio are hollow and disingenuous’. In its view, broadcasters have already adopted ‘the widespread practice of programming networked programming during key day parts’ independently of the Bill and in an effort to ‘drive cost and resource efficiency and continue to generate healthy profits’. In the PPCA’s view, this ‘shift towards networked content at peak times has had far-reaching consequences’ for ‘local artists and communities in regional areas’. The PPCA argued:
Where once there were opportunities for these artists to shine during the hours when listenership is at its peak, the landscape has shifted. Instead of celebrating and promoting local talents during these crucial periods, the airwaves have been overtaken by networked programming originating from metropolitan stations or much larger regional centres.
Impact on the Australian Broadcasting Corporation
2.87According to the ABC, the cap on licence fees payable by the ABC for sounding recordings ‘supports a policy objective of ensuring that recorded music continues to be accessible to the public and affordable for the ABC’. The ABC argued that the current caps under the Act allow ‘public broadcasters to have access to music repertoire at a manageable and fixed price’. For that reason, the ABC argued that maintaining the cap is in the public interest:
The public interest objective in ensuring that all Australians have free access to music repertoire through a statutory cap continues to be important today particularly given the emergence and dominance of paid subscription music streaming services and the increasing conglomeration of the music industry. The ABC will continue to strive to achieve this public interest policy outcome by continuing to be a platform for the discovery and development of Australian music.
2.88In the ABC’s view, ‘music is intrinsic to everything the ABC does’ and that the ABC has ‘responsibilities to promote the musical and performing arts in Australia’. That responsibility is outlined as a function of the ABC in section 6 of the Australian Broadcasting Corporation Act 1983 (Cth):
(1)The functions of the Corporation are:
(c) to encourage and promote the musical, dramatic and other performing arts in Australia.
2.89The ABC submitted that it achieves this function ‘in a range of ways, but in particular through commitments made and delivered on its music services’. For example, the ABC noted it ‘provides specialist music content to further promote Australian artists’. These include ‘triple j programs that focus exclusively on Australian artists’ such as ‘Blak Out’ and ‘Home and Hosed’:
Through these programs and services, the ABC identifies new talent and builds profiles of Australian artists. The promotion and support that Australian artists receive can be a major support to their careers.
2.90The ABC argued that because it is allocated a fixed budget, any increase in licence fees brought by the Bill would undermine its ability to perform those functions under its charter:
The ABC submits the proposed change to section 152 of the Copyright Act will make it harder for the ABC to achieve its remit under the Australian Broadcasting Corporation Act 1983 (Cth). The removal of the ABC's cap will impact the services and activities provided by the ABC as the ABC has a fixed budget of allocated public funds.
2.91The ABC further added that ‘the licence fees the ABC pays under the radio cap is a small part of a sophisticated and complex network of licences the ABC has entered into to use sound recordings on its services’. For that reason, it recommended ‘that the Parliament should not amend one provision of the Copyright Act in isolation without consideration of making attendant amendments to others including s105, s107, s109, S110C, s111A, s111B, and s248H of the Act’.
2.92Additionally, Ms Kate Gilchrist, Head of Content and Legal Operations, Legal, ABC, argued that the Act ‘is not fit for purpose in today’s digital age’.Ms Gilchrist explained that the ABC operates both radio broadcasts and digital services:
Section 152 relates to the statutory licences set out in section 109, which says that broadcasters can broadcast published sound recordings in Australia. Then section 152 comes along and sets the cap, and allows the parties to go off to the Copyright Tribunal. Section 109 is particularly out of step with the digital age. It talks about broadcast. It doesn't talk about communication to the public. When you look at the ABC, which is moving to a digital-first strategy, where we are trying to reach Australians through our online services, we don't have a compulsory licence that allows us to use sound recordings on our online services. It is at the discretion of the copyright owners to grant us those rights, whereas we say there is a public interest in having that compulsory licence to ensure that Australians have free access to sound recordings in Australia.
2.93However, the PPCA supported the repeal of section 152(11) of the Act. It criticised the ABC cap on licence fees due to the quantum of licence fees that the ABC currently pays for the broadcast of sound recordings on radio. It stated that in the 2022-23 financial year:
… ABC paid just $130,000 for all sound recordings played on all ABC radio stations around the country. This cap is completely indefensible. The amount is less than half of the licence fees paid by the community radio sector in the same period, organisations that don’t have the benefit of taxpayer funding.
2.94The PPCA concluded:
There are no other areas of the ABC’s operations where it benefits from a statutory determined rate for the provision of content or any good and services that it requires to operate its business…The only input that it does not have to pay market rates for is sound recordings. There is simply no justification for this.
International obligations for artist remuneration
2.95AGD noted in its submission that the Act extends certain protections to countries which are listed as Schedule 3 countries in the Act:
Countries listed in Schedule 3 are countries which provide rights for secondary uses of sound recordings, being public performance and broadcast rights in copyright for sound recordings.
2.96It explained that countries listed in Schedule 3 have reciprocal protection for the broadcast of sound recordings, meaning that the PPCA is able to collect and distribute royalties for broadcasts internationally through arrangements with overseas collecting societies based in those countries:
…copyright owners that are nationals of these countries, or owners of recordings made in these countries, have the exclusive right to broadcast a recording to the public in Australia and therefore benefit from royalties paid for the use of their sound recordings in Australian broadcasts. In turn, Australian copyright owners benefit from reciprocal protection for the secondary uses of sound recordings in broadcasts in these foreign countries. Radio stations therefore have to pay royalties for broadcasting Canadian or UK sound recordings, for example. The practical effect is that PPCA is able to collect royalties from these and other Schedule 3 countries when Australian recorded music is played overseas and to distribute these royalties to Australian rightsholders, and vice versa. This collection and distribution are facilitated through agreements that PPCA has with overseas collecting societies.
2.97The Law Council further noted the World Intellectual Property Organisation (WIPO) Performances and Phonograms Treaty which ‘Australia has been party to … since 2007 and, accordingly, is bound by’. The Law Council explained:
…internationally, the WIPO Performances and Phonograms Treaty 1996 (WPPT) administered by the World Intellectual Property Organisation, a United Nations body based in Geneva, Switzerland, provides in article 15:
1) Performers and producers of phonograms shall enjoy the right to a single equitable remuneration for the direct or indirect use of phonograms published for commercial purposes for broadcasting or for any communication to the public.
2.98MEAA and Genuine Article raised concerns that there are some countries which do not reciprocate payments to Australian copyright holders for the broadcast of sound recordings. It explained this was a ‘knock-on effect of Australia’s failure to incorporate performers’ [equitable remuneration] right into law’ by not applying Article 15(1) of the World Intellectual Property Organisation (WIPO) Performances and Phonograms Treaty (WPPT). In particular, MEAA and Genuine Article noted ‘that the United Kingdom (UK) took the decision in 2013 to cease paying Australian performers from UK broadcasts’. MEAA and Genuine Article added that ‘many other territories such as Sweden, Switzerland and Canada, also refuse to reciprocate Neighbouring rights with Australia as a consequence of our lack of protection to performers’.
2.99MEAA and Genuine Article did not support the Bill and instead recommended:
…the incorporation of Article 15(1) into domestic law before tackling the issue of Radio Caps. This will bring the rights of performers in Australia in line with the rights of performers the world-over and in turn ensure that the UK is legally obligated to turn the Neighbouring Rights tap back on for Australian performers.
Committee view
2.100As discussed earlier, the Bill would amend the Copyright Act 1968 to remove restrictions on the amount the Copyright Tribunal can determine is payable in licence fees for the broadcast of sound recordings on radio by commercial broadcasters and the ABC.
2.101The committee heard that the Bill would allow copyright owners to freely negotiate licence fees with respect to the broadcast of sound recordings. Those in support of the Bill argued that removing the current caps would mean that copyright owners and Australian recording artists receive fair remuneration for the use of sound recordings. It was also argued that higher licence fees would benefit Australian artists and the music industry, both through direct payments to artists and through industry investment.
2.102In contrast, those opposed to the Bill argued that removal of the caps would impose significant financial costs on commercial radio broadcasters and the ABC by allowing copyright holders to negotiate higher broadcast licence fees. The committee heard that this could lead to a loss of jobs and station closures, particularly in regional areas.
2.103The committee understands there are arguments on both sides of the debate concerning the removal of the current caps on licence fees under the Act and before legislation of this kind can be properly considered the financial impacts should be assessed. The committee considers that the federal government should conduct a cost-benefit analysis of removing the caps and the impact such changes would have on the distribution of funds to artists and creators before any decision is made about removing them.
2.104The committee recommends that the federal government conducts a cost-benefit analysis examining the impacts of removing the current caps on licence fees for the broadcast of sound recordings on radio.
2.105The committee recommends that the Senate does not pass the Bill.
Senator Nita Green
Chair